Impact of Terrorism on Stock Market: Evidence from Pakistan Banking Sector

— this study aimed to investigate the impact of terrorism on stock market. The two major terrorist attack’s impact on stock market in 2014, the attack on army public school Peshawar and attack in Jinnah international airport Karachi. Event study approach is used to find the effect of these terrorist attack on stock market by constructing the estimation window of 250 days prior to event and event window of 31 days 15 days before the event 15 days after event and one event day. The population of study is all commercial bank in Pakistan by taking sample of 14 listed commercial banks in KSE100 index. Market model is use to find the expected return and abnormal returns determined by taking difference of actual and expected returns. The abnormal returns and cumulative abnormal returns show significant impact of army public school Peshawar attack, while there is insignificant impact of Jinnah international airport Karachi on bank’s stock returns.